Verizon Saves 60% Swapping Copper for Fiber
ORLANDO -- Genband Perspectives 2015 -- Verizon has transformed only seven of its central offices from copper to fiber, but the benefits realized from the first seven have convinced it to do the same with its remaining 2,000-plus central offices.
Speaking here at Genband Inc. 's annual conference, Sowmyanarayan Sampath, SVP of transformation for Verizon Communications Inc. (NYSE: VZ), explained how the carrier was forced to transform one of its largest central offices in New York after Hurricane Sandy destroyed it in 2012. Rather than rebuild the 100-year-old network with copper, it chose to go all fiber.
As a result, Sampath said, the carrier created new revenues by enabling it to do fiber-to-the-premises. It has since done this transformation to six other central offices and plans to (eventually) transform the rest as well. Sampath said Verizon is the only carrier in the world that has made an attempt to upgrade its entire CO footprint from copper to fiber.
Bulding out fiber was the first opportunity Verizon found to make this wholesale change. The second was to migrate subscribers off copper and on to fiber, a sometimes formidable challenge with those who wanted to keep their POTS around awhile longer, which would necessitate keeping the entire copper network up and running. The third opportunity, Sampath said, was to create a growing fiber business with very healthy margins. (See Line-Powered Phone Lines: A Hot Topic Again.)
"The economics of fiber are fascinating," he said. "At the end of the day, the customer wins."
The numbers, as Sampath broke them down, are pretty compelling. Verizon has 50 million square feet of CO real estate today, he said, 60% to 80% of which it does not need. It can take these locations down from 13 floors to only one or two, bringing about cost savings by paying less property tax and leasing the space for other usage.
And fiber has proven to be 70% to 90% more reliable than copper depending on the typology, he said. Verizon can pass some of the savings on to the customer. Overall, Verizon ends up realizing about 60% savings in dispatches and about 60% savings in energy and is able to create new revenues from upgrading its customers.
"When you do these business cases, almost 60% [of savings] come from new revenue as folks without fiber before get fiber," he said. "We see a fair amount of folks who use this opportunity to get better services. We've proven time and again this pays for itself. It is sustained pay back."
Sampath also shared some of Verizon's biggest lessons learned from its first seven CO transformations. Among these: Verizon learned that it needs to start cleaning data six months to a year in advance because so much of it is old and outdated. It also needed to start letting companies and consumers know about the migration early -- about a year ahead of time. And Verizon had to be careful to find reasonable product substitutes for its customers and pay careful attention to certain segments, like government, that require special handling, Sampath said.
As to why Verizon is taking on this huge project now, at a time when no one is complaining about their copper networks, he said it's because copper revenue declines 8% to 10% every year and remains a fixed cost. The transition takes out a huge amount of cost for the carrier.
"The copper network today does not serve the need of our customers," Sampath said. "This is our way of truly transforming the network."
Network transformation is, of course, a big theme of Genband's, as the vendor is keen on helping operators migrate away from TDM to IP, financed entirely by the money saved on power and water when switching to its next-gen network gear. But, as Sampath pointed out, Verizon is one of the first carriers in the world to actually start overhauling its network. Genband's new CMO Patrick Joggerst said that most carriers are just now getting started. (See Genband Appoints New CMO and Genband Plots Funding of TDM Death March.)
Addressing the Perspectives audience, Genband President and CEO David Walsh reiterated why they might want to start soon. There are more than 30,000 central offices in North America, he said, many of which aren't needed anymore. The PSTN remains a $100 billion annual revenue business in the US alone, but it costs $63 billion just to power it.
"The value of the carrier assets is amazing, and they're being repurposed," Walsh said, later adding, "Now is the time to make this move and make the shift."
— Sarah Thomas, , Editorial Operations Director, Light Reading